Apple Watch demand is worse than expected, says Pacific Crest analyst Andy Hargreaves.
Here’s Hargreaves in a new report:
Store visits, Google search volume, third-party data and recent supply checks all suggest demand for Apple Watch has fallen sharply from initial levels. We believe strong initial demand should allow Apple to meet or exceed our FQ3 unit estimate of 5.5 million, and the ongoing global rollout should support relatively strong volume in FQ4. Consequently, we are reducing our F2015 estimate only slightly to 10.5 million from 11.0 million. However, soft follow-on demand appears likely to drive F2016 volume more meaningfully below our previous expectations. As a result, we are reducing our F2016 Apple Watch unit estimate to 21 million from 24 million.
Hargreaves previously noted that Google Trends showed people are more interested in the iPod than the Apple Watch, which is not a great sign since the iPod is dead and the Apple Watch is supposed to be the next major product for Apple.
He’s not the only analyst whispering about watch weakness. Neil Cybart at Above Avalon relays the following:
On Apple’s last earnings quarter, Toni Sacconaghi of Sanford Bernstein took issue with Tim Cook’s attitude and tone when discussing Apple Watch. Here’s Sacconaghi:
“I just wanted to revisit the watch. Tim, I think you’ve said, when you were talking about your new products, you said we’re ‘very happy with the reception’ and in response to a previous answer, you said, ‘relative to demand, it’s hard to gauge with no product in the stores.’ I would say relative to other product launches, where your commentary around demand was characterised by superlative after superlative, that assessment feels very modest.”
Tim responded, “I’m thrilled with it, Tony, so I don’t want you to read anything I’m saying any way other than that. So I’m not sure how to say that any clearer than that.” Sacconaghi recently visited with Tim Cook and Luca Maestri and once again he made note of their demeanour, saying their tone was “confident, though not ebullient.”
This is not exactly the most damning thing you can read, but it’s enough to start some concern about the watch in analyst land.
Even if the watch is a flop, it doesn’t matter. The iPhone is killing it for Apple, and that’s how it makes money. Any sales of the watch are a nice bonus.
It’s possible the watch just isn’t going to be a major product, at least not right away. It may take years of refinement before it really breaks out.
Before Apple launched the watch, Cook noted that young people don’t wear watches.
Speaking at a tech conference in 2013, Cook said, “If we had a room full of 10- to 20-year-olds, and we said ‘Everyone stand up that has a watch on,’ I’m not sure anyone would stand up'”.
“There’s nothing great out there that I’ve seen,” Cook continued. “There’s nothing that’s going to convince a kid who has never worn glasses, or a band, or a watch, or whatever, to wear one, or at least I haven’t seen it. I think there’s lots of things to solve in this space, but it’s an area that’s ripe for exploration.”
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